I do not think much of inflation expectations but the Fed strongly believes in them, and so do some others.

Pater Tenebrarum at the Acting Man blog commented “I agree . It is typical for the late stage of the business cycle, you get price inflation going, but it cannot last long. Note though that at some point (depending on central bank actions in response to the next bust and contingent circumstances) there could be a tipping point toward another stagflation period.”

Ben Hunt, author of Epsilon Theory and chief risk officer of Salient Partners, mentioned a specific narrative that has accompanied quantitative easing for almost a decade now (even longer, if we take Japan into account). At first glance it appeared reasonable enough: central bankers argued that QE would help increase “inflation”. This is of course unequivocally true in terms of monetary inflation, but they referred to consumer price inflation. Alas, both CPI and inflation expectations obviously failed to respond appreciably to their ministrations. Ben posits that this narrative may be set to falter in a rather unexpected manner, by continuing to defy widespread expectations.